Each week, we’ll interview one of our experienced Finance Officers for a brief question and answer session about something interesting from the week, along with tips and tricks to make your finance process easier, and their unique perspective on the industries and customers we work with.

This week, we caught up with Travis Van Houten in our Portland office who talks a little bit about how time can be an important factor when trying to help a customer that may have some areas of their credit profile that are not as typical.

Q: Thanks for speaking with me today, Travis. I know you had mentioned there was a particular deal you wanted to talk about that had some obstacles to overcome. What made this transaction so difficult in the first place?

A: This was a repeat customer that came my way who had challenged credit… Probably not your typical C-Credit – strong cash flow and tax returns. 561 and 577 for credit scores. Not only that, but they operate in the logging industry. The logging industry can be tough. Essentially, a lot of places don’t like to work with logging as much. With a low FICO score along with working in the logging industry, we knew we would have some trouble.

Q: What makes the logging industry more difficult?

A: Our funding sources don’t always want to fund that industry. We do have places that will, but if it’s outside their credit guidelines, they will be more hesitant to take that on. You have to find the sources that will look at someone where the credit is poor, not terrible, and in a restrictive industry… We really have to look at a more limited list of people that will work with all of these factors, and that are more cash-flow based. The equipment was also non-titled, which some of these specific funding sources prefer. Strong cash flows and non-titled equipment made this a good look for a couple of these more niche sources.

Q: Any other challenges on this one?

A: Putting together the financials was a hurdle we had to get over. They didn’t really have an accountant that dealt with some of the specific items that we usually grab in these cases, so I had to get together with someone over there who wasn’t as versed in finance, and walk her through what a balance sheet is and an income statement. She was able to do those on QuickBooks and send them my way, and they were pretty strong – they looked good. When it comes down to say, challenged credits… Credit can be one thing, but financials can be another. Some businesses are more cash-based rather than credit-based.

Q: What makes non-titled equipment preferred?

A: That’s a good question. I think it’s because it holds it value better. You’re talking about, say, trucks, on the other end of the spectrum. You put a lot of miles on them and the equipment’s value seems to depreciate a lot faster than, say, a 1996 John Deere Skidder, which will hold it’s value a lot better than a truck would, or a trailer. That’s why we had a little bit more wiggle room with someone that’s a C-Credit, or D-Credit.

Q: How did things progress once you were able to find somewhere to place this deal?

A: They had to put down a more significant security deposit – maybe $16,000 or $19,000 down on a $42,000 piece of equipment. You have to be upfront with the customer on why some of these initial costs may be higher than average, but that we’re doing everything we can on our end to get it done.

Q: So, you would say that customers with a similar profile will probably need to factor in a little more time into these deals in order to get them done?

A: Yeah, that’s a good way to put it. It was taking around a week or a week and a half to find an approval on this one, and the customer was starting to get nervous. I just had to assure them that we were working hard and weren’t giving up until we knew for sure what we were able to do on this deal.

Q: So, in the end, the customer was satisfied with how things turned out?

A: Yeah, we were able to get her the equipment, and she left us a pretty good review when it was all said and done. With situations like this, when you can overcome a lot of the obstacles, it can feel like a great relief when it closes out in a positive way.

Next week we will check in with another one of our finance officers to continue to give prospective on how we are able to help customers just like you! Stay up to date and learn more from our valuable resources at www.AmericanEFS.com/The-Bottom-Line